patrick.net

https://www.cnn.com/2024/07/01/business/adjustable-rate-mortgages-higher-payments/index.html

Thousands of homeowners are about to get slammed with higher monthly payments

Last year, when Jennifer Hernandez received notice that the mortgage payments on her Houston home would jump about $2,000 per month, she was stunned.

Hernandez refinanced her home loan in 2016 using an adjustable-rate mortgage loan, which has a low introductory rate for a fixed initial period.

Hernandez, who is herself a loan officer, had misremembered the terms of her $1.1 million loan: rather than a 10/1 ARM, which has a fixed rate for the first ten years and resets every year after that, Hernandez had taken out a 7/1 loan.

“I just got caught blindsided,” she said. “Life gets in the way, and you get busy. I’ve been slammed with kids and work for the last seven years.”

Last October, Hernandez’s mortgage rate jumped by 2% to 5.125%, the maximum allowed in the first adjustment year, according to her loan terms.

Most ARM loans come with an interest rate cap to prevent costs from spiraling out of control. Hernandez said her ARM is capped at 8.125%, five percentage points above her initial fixed rate.

Interest rates can be unpredictable. Hernandez said she saved money in the initial seven years of her loan, but if she could have a do-over, she likely would not have chosen an adjustable-rate mortgage in 2016.

As much as we love our current place, decided to move as we'd rather spend the money on trips. Will go down to the same rent we payed when we moved back to California over four years ago. But instead of a 2 bedroom apartment, will be living in a 3/2 1500 sqft house. For everyone who says rents have to go up, and you can't save money renting, read that last part again.

zzyzzx says

The typical new home in the U.S. is shrinking

Most people don't need more than a 3/2.5. 2k sq. ft is about all people need in most situations, especially with a basement in our area. We're going 4/4.5, 2,400 sq. ft. Last home we're doing with kids. Anything else will be a condo where I don't have to do shit after 60-65. Probably a 2/2 in a fun/warm area. Bounce back in the summer/hurricane season to IL.

I need a change of season or location. California is great, but I couldn't deal with a lot of stuff there. Politics being a biggie, taxes, homelessness, gays, etc. I just want to be 1-2 hours from a major airport is all.

NuttBoxer says

For everyone who says rents have to go up, and you can't save money renting, read that last part again.

There is the New York Times Rent Vs Buy calculator. I remember Patrick going back to around 2007 saying his family and him were going to continue to rent.

I wonder when Patrick will buy as I recall he said he was waiting for his public school teacher wife to retire and they may move from California.

When Patrick buys then its a great time to buy (unless he won the lottery or inherited a lot of money, and it does not matter what price he pays for a home).

A lot of what I learned from Patrick helped as we bought a home in summer 2016 at a very good price, and at a 3% mortgage rate. Glad we had the patience which I attribute to following Patrick since around his interview on 20/20.

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WookieMan says

Anything else will be a condo where I don't have to do shit after 60-65. Probably a 2/2 in a fun/warm area. Bounce back in the summer/hurricane season to IL.

You all sound like a great buyer for Island Reserve in Panama City Beach. I think it is about 15 hours driving time to Chicago from there. It will be frigid in March in Chicago and it will be low to mid 70s in Panama City Beach, warm enough for beach weather.

Almost 9 months beach weather in Panama City Beach compared to 10.5 months in South Florida.

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zzyzzx says

Last October, Hernandez’s mortgage rate jumped by 2% to 5.125%, the maximum allowed in the first adjustment year

Sounds like year 2008, but at least in 2008 it was 2% ARM verses 5% Fixed — tough to say no to that 3 point difference. Getting a 2% verses 3% fixed in 2016 doesn't make much sense. Lock in 3% forever.

SunnyvaleCA says

Sounds like year 2008, but at least in 2008 it was 2% ARM verses 5% Fixed — tough to say no to that 3 point difference. Getting a 2% verses 3% fixed in 2016 doesn't make much sense. Lock in 3% forever.

We locked in a 3% fixed rate for a Veteran Affairs 30 year mortgage in summer 2016, and yes we were tempted by the rates offered in Adjustable Rate Mortgages (ARMs).

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WookieMan says

Most people don't need more than a 3/2.5. 2k sq. ft is about all people need in most situations, especially with a basement in our area. We're going 4/4.5, 2,400 sq. ft. Last home we're doing with kids. Anything else will be a condo where I don't have to do shit after 60-65. Probably a 2/2 in a fun/warm area. Bounce back in the summer/hurricane season to IL.

True, but in places like Florida, etc, that don't have basements or attics, a 2000 sq ft house probably doesn't work since they have literally NO storage space.

zzyzzx says

WookieMan says

Most people don't need more than a 3/2.5. 2k sq. ft is about all people need in most situations, especially with a basement in our area. We're going 4/4.5, 2,400 sq. ft. Last home we're doing with kids. Anything else will be a condo where I don't have to do shit after 60-65. Probably a 2/2 in a fun/warm area. Bounce back in the summer/hurricane season to IL.

True, but in places like Florida, etc, that don't have basements or attics, a 2000 sq ft house probably doesn't work since they have literally NO storage space.

It all depends on how many clothes the wife has

https://wolfstreet.com/2024/07/04/whats-the-cost-of-mortgage-rate-buydowns-and-other-incentives-to-homebuilders-lennar-discloses-the-numbers/

What’s the Cost of Mortgage-Rate Buydowns and Other Incentives to Homebuilders? Lennar Discloses the Numbers

In the first half of 2024, the average incentive costs, including the costs of mortgage-rate buydowns, rose to $47,100 per house sold, or to 10.1% of the average sales price, up from 9.2% a year ago.

The costs of those incentives vary by market. In Texas, they reached 16.9% or $51,600 per house. In “Other” regions, which include Florida, they amounted to 13.4%, or $81,700 per house

And that is why newly built homes are outselling used homes. Duh.

Not a sustainable practice though, one would think.

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Apartment owners are reported to be next as far as real estate defaulting. I noticed rents in Panama City Beach have held steady for the last 2 to 3 years essentially. A 3 bedroom, 2.5 bath, 2 car garage townhome within 2 miles of the beach still rents between $2000 and $2200, the same it was back in 2021.

If rent goes down (or does not rise much each year) for these townhomes, then the landlord investors are willing to offer a lower price to buy these townhomes.

https://www.yahoo.com/news/apartments-could-next-real-estate-200023675.html

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"That could be a big problem for investors like Tides Equities, a real estate investment firm based in Los Angeles that bet big on multifamily properties in the Sun Belt. Just a few years ago, Tides Equities owned about $2 billion worth of apartment buildings. That figure quickly grew to $6.5 billion. Now, as rents and prices for those apartments fall, the firm is struggling to make loan payments and cover operating expenses, according to CRED iQ.

Executives at Tides Equities did not respond to requests for comment.

All that said, apartment buildings are likely to be on stronger financial footing than offices, for instance. That’s because multifamily units can be financed by lending from the government-backed mortgage giants Fannie Mae and Freddie Mac, which Congress created to make housing more affordable."

in idaho out here, a lot of people moved in which spiked sales a lot. it keeps going. however interesting enough flippers see losses. 4 different guys who came here tried flipping, 3 lost money and one made very little. no one buys flips here, mainly new construction.

DemocratsAreTotallyFucked says

I'm sorry I didn't invest more into Idaho. Its such a landlord friendly state. I miss the Sawtooths so much

Back to 2015 inventory levels in Orlando, Tampa.

RedStar says

DemocratsAreTotallyFucked says

I'm sorry I didn't invest more into Idaho. Its such a landlord friendly state. I miss the Sawtooths so much

it’s pricey here, but as landlord there isn’t appreciation or serious income. frequent tenant turn over. people who rent have very little income. all the wealthy moved to towns by grand tetons and sun valley.

AmericanKulak says

Back to 2015 inventory levels in Orlando, Tampa.

I hate Orlando and Tampa, so I could see them not being popular. It's the FL ghetto in my opinion. Wife wants to try different parts of FL and I just don't dig it. Jacksonville is a shit hole as well.

Problem is it's not a buyers market until you hit 6 months. The housing bust was 12+ months in many locations. I think at one point our neighborhood we sold the most in got up to 15 months inventory. Got a far way to go for a housing bust. Then they'll just drop interest rates, inflation be damned. I don't think we'll see 2005-2009 again in any of our lifetimes. That was more about lending standards and over building. I don't see either still.

WookieMan says

I hate Orlando and Tampa, so I could see them not being popular. It's the FL ghetto in my opinion. Wife wants to try different parts of FL and I just don't dig it. Jacksonville is a shit hole as well.

Agreed. Orlando never impressed me the first time I saw it as a kid, it was all sprawly. Now it's worse thanks to waves of "internal migration" as well as "international migration". When I see a Kia I keep at least 4 car lengths away. Kias and Beamers. The Greenbelt went out further and further until to live in anything like the edge, you're an hour out as the car drives over high traffic congested highways.

I never liked Tampa, it's actually the wokest, bluest city in Florida, full of retired Minnesota/Winsconsin UltraLeft Schoolmarms on one hand and Methheads on the other. People pick on Miami, but Miami has based Cubans and right wing rich people in big numbers to balance things; Tampa does not. That's why Tampa had a Soros-backed DA, soft on BLM riots, and DeSantis went after the DA and got the "Freedom to Escape Riots in Cars and shoot within 100 feet during riots" bill passed.

Sadly, the "Wild West" part of the South florida East Counties got developed like mad in the past 20 years. I remember my HS Girlfriend's was at the edge of the Savannah, there was a gas station on the main road just before turning on to her street, and beyond that to the West, nothing but the very occasional small modest new house, maybe 1-2/block.

I don't just mean Broward, but like St Lucie. I'm not paying $300k for a 20 year old 1400 sq ft that sits 45 minutes as the car drives in traffic from the beach. Same shit happened in Deltona, western Volusia County : it was a ruralish-retreat, but in the past 20 years is overdeveloped and packed with migrants living 10 to a 4 bedroom. Lee County is now getting Volusia'd.

Went to visit friends who are in the area, and what was once the wild, panther growling wilderness was wall-to-wall I-95 spawl with at least a dozen traffic lights and congestion up the ass.

I should drive over and check out the wild Panhandle-to-Pot area counties like Levy and Dixie, but I don't know the Meth situation there.

I like the FL-GA border west of Jax but well east of Tallahassee, up the Lake City / Osecola National Forest area. Unfortunately not in the cards due to child visitation difficulty. That area never gets hit by any substantial hurricanes and you can still find 5 acres and less zoning restrictions. Also you get a nice "Fall" season December-March.

The Villages are full of elderly drunks and and grandma swingers, as is Tampa, although Tampa has meth heads.

AmericanKulak says

I don't just mean Broward, but like St Lucie. I'm not paying $300k for a 20 year old 1400 sq ft that sits 45 minutes as the car drives in traffic from the beach. Same shit happened in Deltona, western Volusia County

try the best place on Earth ... its the American Riviera ... the Florida panhandle...

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HeadSet says

Around here, there is a shortage of home listed because people do not want to sell their homes. One major reason is this example:

Current home, $1,000,000 mortgage at 2% has a monthly payment of $3,696.
Downsize home, $750,000 mortgage at 7% has a monthly payment of $4,990.

Moving to a smaller home at today's interest rates actually can increase the monthly nut and that is after costs like realtor commission and loan origination fees.

It's kind of like that here in California. Because the properties are mostly only reassessed upon sale (*).

If the zillow numbers are correct, a new neighbor on my street has an assessment of 1.05 M with annual tax bill of $15,000, for a 3/2 1200 sq ft 1970 construction with a bit of lipstick on the pig. A few doors away our assessment on 4/2 is about 350k with a tax bill of about $6000 (just a pig, no lipstick).

(*) Major renovations or improvements can cause the place to be reassessed without a change of ownership. Before s/he "went silent" on this blog BayArea shared about something like that happening, or threatened by a county agent to happen, after he upgraded his recent TriValley home. I know someone else, also in Alameda County, who had that happen.

AD says

try the best place on Earth ... its the American Riviera ... the Florida panhandle...

Too far to drive every weekend to Central FL. :(

Next housing crash coming soon? I know when we searched for rentals in Yuma, a number of owners were trying to rent after failing to sell for their desired price. And just like last year, a number of rentals dropped their prices a hundred dollars or more before they found tenants. The place we are moving to was originally listed for $100 more a month.

https://www.zerohedge.com/markets/housing-market-cracks-record-number-listed-homes-have-price-drops

AmericanKulak says

AD says

try the best place on Earth ... its the American Riviera ... the Florida panhandle...

Too far to drive every weekend to Central FL. :(

Not trying to be a dick, but who wants to be in central FL? We've been trying out different places in FL besides the Panhandle and central FL is a shit hole of crappy tourism and just nasty locals. I'm on AD's side on this one. Southern Florida is nice, but I'd prefer the Panhandle from Appalachicola to Pensacola. Anything between that and Southern Florida is a bunch of carpet bagging douche bags and shitty cops. Fuck ton of cunt New Yorkers. Count me out.

But the Housing Experts on PatNet told us...

zzyzzx says

With inflation that's a nothing burger. Look at the last peak. $500k is where it crashes. We're not there at least in the South. Remember the last peak was loan related. It's more secure/better at this point. Not perfect.

The largest generation is coming online housing wise. The floor is high. Loans more secure. Less building. I wouldn't bet against housing even if it pisses people off. I'm about to drop $700k on a house in small town America. We can and will be able to afford it. I don't even care if rates come down. I simply don't care.

Inflation is killing poor people. People of means and money are doing just fine. That's why Biden loses. If you can't keep up with the Jones' you have to blame someone. Trump has been out of office almost 4 years. Who they gonna blame?

A new 760 square foot home community in Fort Worth by Lennar on the Left

A row of chicken coops on the Right.

Homes are selling for $197k.



https://x.com/texasrunnerDFW/status/1811039587633906161

WookieMan says

The largest generation is coming online housing wise. The floor is high. Loans more secure. Less building. I wouldn't bet against housing even if it pisses people off. I'm about to drop $700k on a house in small town America. We can and will be able to afford it. I don't even care if rates come down. I simply don't care.

Older people get sicker, can't climb stairs, need less house, need equity to pay for assisted living or physical therapy visits.

A million multifamily units are coming on. Localities are now forcing developers to finish them.

We're about to have the largest group of people in US history - born 1957 - start heading for bum knees, wheelchairs, and Oxygen tanks that make stairs and high counters a bitch.

Leslie Lesbo McCormick of Cape Cod doesn't want to move to the Villages when her mother passes away. She's gonna dump the house for the cash.

Interest rates aren't going down this year, and they'll be cut a fraction each quarter.

Expect a massive rental/housing price collapse.

True, single level houses have been heavily sought after here by old folks lately. I like stairs, gives you a good workout every day

https://wolfstreet.com/2024/07/10/home-buyers-remain-on-strike-housing-market-still-frozen-as-prices-are-too-high-mortgage-rates-still-7/

$100/sqft or walk.

Also, Geodesic Dome houses have major leakage/rot problems, I discovered. Water gets trapped in all the corners, sometimes from INSIDE the house (ie not coming from the outside, but humidity inside). Very common to them.

mell says

True, single level houses have been heavily sought after here by old folks lately. I like stairs, gives you a good workout every day

Takes more land for a ranch hence why you see the "chicken coop" homes in the above comments. Geezers maybe need 800 sq. ft if they want a detached home. Geezer don't want a yard. They can get more per square acre by putting 6 cheaply built homes in one acre.

Housing is math. Boomers didn't save and cannot afford their monstrous houses. They don't want to be embarrassed though by moving into a condo or townhome. So these mini houses with little maintenance are perfect for them. It will become a ghetto when they die though.

WookieMan says

Boomers didn't save and cannot afford their monstrous houses.

Yes, Wookie - and that's the crux.

They GOTTA sell, esp if they get sick and need additional help.

Problem is, nowhere near enough people to buy them. Hector the Mexican and Alice the $18/hr cashier single mom can't afford $450k for a 1800 sq ft ticky tack shack they don't need and can't buy. With the 30-year old roof and the HVAC system that Uncle Fred put up with because at 72 he didn't notice it's 80F inside the house because the system is on the fritz due to old man heat insensitivity.

AmericanKulak says

Problem is, nowhere near enough people to buy them. Hector the Mexican and Alice the $18/hr cashier single mom can't afford $450k for a 1800 sq ft ticky tack shack they don't need and can't buy. With the 30-year old roof and the HVAC system that Uncle Fred put up with because at 72 he didn't notice it's 80F inside the house because the system is on the fritz due to old man heat insensitivity.

yep, its all about housing affordability

such as using rudimentary ratios like housing price to household income ratio to monitor trends with housing affordability

and I agree you have to account for "total ownership costs" or "life cycle costs" which include also maintenance and repair (M&R) ; and that is why a family member is getting a reversible mortgage to help them financially comfortably live in their retirement home

that is why I see it common for Florida panhandle townhomes to be "boarding houses" where each bedroom is rented out

and that is why they are not selling now as the landlord investors are sitting on the sidelines, and from my review of county records, at least 50% of the townhomes are rented

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AD says

and that is why they are not selling now as the landlord investors are sitting on the sidelines, and from my review of county records, at least 50% of the townhomes are rented

Probably waiting for lower rates I imagine.

One a different tack, one nice thing that I think is happening is that Wokanda is falling because Venture Capital can't keep loaning money as Angel Investors to wokish media with these rates. Their money is no longer "Practically Free".

An Aussie firm just basically shut down and cancelled all their content republishing contracts with Vice, Kotaku, and a bunch of other wokey media .

So many things are coming to a head.

AmericanKulak says

Probably waiting for lower rates I imagine.

I wonder how this company Open Door (stock ticker: OPEN) is faring and when will it go bust :

https://www.opendoor.com/homes/colorado-springs

Been hearing about a lot of layoffs recently like today's report of layoffs at John Deere, CNN and Intuit (i.e., Turbotax, etc).

How long before enough voters do not believe the economy is good ? The S&P 500 going up does not help this, as the investor class or Wall Street (not main street) reap the gains.
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